Property brokers have called the bottom of the Dubai office market as rents in the best quality buildings began to rise for the first time in more than four years.
Prime office rents rise in Dubai
Property brokers have called the bottom of the Dubai office market as rents in the best-quality buildings began to rise for the first time in more than four years.
Rents for prime offices in the city rose 10 per cent during the first three months of the year after falling in some areas by as much as half during the downturn, according to Jones Lang LaSalle.
The upturn marked the first time since the survey started in 2009 that all sectors of the Dubai property market have shown signs of recovery.
Rents in Dubai's top office districts such as Sheikh Zayed Road, Burj Khalifa Downtown, Jumeirah Lakes Towers and Tecom rose by 4 per cent over the quarter to an average of Dh1,690 (US$460) per square metre.
Rents at the Dubai International Financial Centre (DIFC), the city's most expensive office district, remained unchanged at Dh2,370 per sq metres.
The broker said it was aware of potential demand for another 190,000 sq metres of offices, most of which came from professional service, energy and telecoms companies.
With confidence returning to the market and with stalled office schemes such as the Central Park project in DIFC and the next phase of the Dubai World Trade Centre restarting, Jones Lang said that an additional million square feet of new offices could enter the market by the end of the year.
However, the broker added that with about 145,000 sq metres of new offices coming to the market during the first quarter of the year and tenants finding deals in newer stock, older buildings in Dubai will struggle to let.
The quarterly survey of 40 submarkets found that nearly a third (31 per cent) of Dubai's 7 million sq metres of offices remain empty.
It added that 40 per cent of Dubai's office blocks are owned by a variety of different owners in so-called "strata titles", which are less popular with large office tenants.
"In terms of rentals, demand is generally picking up and the best- quality products are driving the continued improvements in performance that we are seeing across the residential, office and retail sectors," said Craig Plumb, the head of research at Jones Lang's Dubai office.
"For these properties we would expect to see further price and rental growth over the rest of 2013. However, lower-quality space in secondary locations will continue to struggle with the continued legacy of oversupply and high vacancy."
Last week fellow broker Cluttons said that it was seeing rent rises of 10 to 15 per cent in better quality buildings in new business districts such as Jumeirah Lakes Towers, Tecom C, Al Barsha and Business Bay where commercial rents had previously fallen by as much as 50 per cent.
However, it added that across the prime Grade A markets, it continued to see competitive pricing and landlords splitting offices into smaller units in an attempt to attract potential tenants.